||Schofield Hall 218|
||Eau Claire, WI 54702-4004|
New Law Cuts Loan Payments
For Some Alumni, Students
MAILED: Nov. 13, 1998|
Alumni and some current students with federal student loans have a chance to decrease their monthly loan payments, but they have to act fast.
The recently finalized Higher Education Act includes a provision that sets a new interest rate formula that has resulted in an interest rate of 7.46 percent for all new federal student loans. This low interest rate also will be applied to Direct Consolidation Loans until Jan. 31, 1999. This means that any alumni with a Direct Loan or Federal Family Education Loan or any current student with a Direct Loan can now apply to refinance their loan(s) at the lower interest rate. Current students with a Federal Family Education Loan are not eligible to apply for a Direct Consolidation Loan.
The rate for federally backed student loans is set each July 1, based on the rate for 90-day Treasury bills, plus a differential. For the past five years, that differential was 3.1 percent. The new legislation lowers the differential to 2.3 percent for the next five years, effectively cutting this year's rate from 8.25 percent to 7.46 percent.
UW-Eau Claire Financial Aid Director Kathy Sahlhoff said it is estimated that a student who consolidates $20,000 in loans can save more than $1,000 over the course of repayment. After Feb. 1, 1999, refinancing rates revert to the old formula of using a weighted average of the original loans. The lower rate will continue to apply to all new loans made by the government's own Direct Loan program, which UW-Eau Claire participates in, as well as its guaranteed loans made through banks and other lenders.
For information on refinancing student loans, borrowers can call the Loan Consolidation Network, (800) 557-7392 from 8 a.m. to 8 p.m. EST or access the Direct Loan Web site (www.ed.gov/DirectLoan). Alumni who have Federal Family Education Loans should consult with their current loan holders to determine the benefit programs currently available to them before they apply for consolidation through the Direct Loan Program.
Janice B. Wisner
UW-Eau Claire News Bureau
Updated: Nov. 13, 1998